Three Cases Against Social Entrepreneurship and a Few Suggestions on How to Overcome Them

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In Summary: By breaking down huge and overwhelming problems to their components and solving each part one by one, we can make enormous progress in solving great challanges.

Solving the big problems of the world can seem like an overwhelming task. It might appear impossible to make a real impact without fundamentally rethinking basic concepts, such as capitalism, inequality, equity, and changes within society as a whole. However, if we break down these huge concepts into their component parts and try to solve the small problems one by one, it becomes possible to make a much greater impact. In what follows, I will suggest one possible framework through which to make a real difference in every area of people’s lives.


Quite often, after we design a product or service that we think is sustainable and has the potential to make a big societal impact, we realise that it does not actually offer something that is attractive to people. On the other hand, solutions that are more attractive to a large n

umber of people are often environmentally disastrous or unsustainable if implemented on a larger scale. The question is: how can we design a product or service that is at the same time attractive to individuals, applicable within a small community and sustainable on a larger societal scale.

Another important consideration is the fact that social ventures are typically viewed as less sustainable and profitable than traditional for-profit businesses. Most obviously, those organisations that rely on donations as a primary source of income are especially vulnerable in times of economic downturn. It is relevant to ask whether there is anything we can do about this.


Are the “big problems of the world” too overwhelming?

When entrepreneurs think about how to tackle big social problems, they can easily become overwhelmed. Just writing down the words poverty, health crisis, educational reform, large-scale social change can paralyse us by confronting us withs the magnitude of the problems.

However, in completing this course and throughout of my reading on this topic, I noticed a recurring theme. This is the proposition, put forward by various scholars, including Abhijit Banerjee and Esther Duflo (Banerjee et al., 2011), that we need to break down the big societal issues we want to tackle into smaller parts. Doing this allows us to make real progress and achieve a much greater impact.

That said, in order to avoid losing sight of the big picture, and thus ending up neglecting important aspects of the problem, it is also necessary to find a holistic approach that is detailed enough to embrace all the aspects of human life.

One theory developed by researchers Carol D. Ryff and Corey Lee M. Keyes could offer a possible solution. In 1995 they proposed a 6-factor model of wellbeing (Ryff et al., 1995), which covers every area of life. Their holistic model offers an effective frame of reference while at the same time enabling us to zero in on and develop solutions for specific areas of wellbeing.


Source: (Pruinelli et al., 2017)


Who is the real customer of a social venture? A few words on the problematic nature of social value propositions.

According to Greg Dees, social entrepreneurs pursue new opportunities, innovate and ultimately create public value (Bornstein et al., 2010). However, in addition to creating real public value, a social entrepreneur also has to consider the needs of a community, as well as simultaneously providing tangible value for individuals. The value proposition of a social enterprise therefore has to be a multi-level one.

If an organisation provides value only for individuals, there is a danger that it ends up neglecting the long-term perspective, damaging the environment and ultimately harming society. Another common mistake is for the value proposition of an organisation to focus exclusively on the community, or on society as a whole. If an organisation neglects to satisfy the short-term needs of the individual customer it is likely to end up by designing products or services nobody wants. (Blank, 2005).

In my opinion, the great challenge in creating a good social value proposition is to align all three, often opposing interests. If we could achieve this, we could create an organisation that would prosper both in the short term and the longer term, one that considered the needs of every stakeholder. This responsibility to align short-term and long-term interests rests on the shoulders of the social entrepreneur.

Ever since Aristotle, many great thinkers have believed that the ultimate meaning of life is happiness. Everything we want and desire and pursue is simply a means to achieve this end. In his 2004 book, Mihály Csíkszentmihályi (Csíkszentmihályi, 2004) explains the strong correlation that exists between business success and happiness. He argues: “(…) any commodity that reaches the market, from food to books, from airplane travel to banking (…) its market value ultimately depends on the anticipated happiness it is expected to provide.”

Of course, as humans, we often mistake long-lasting, deep satisfaction with short-term pleasure. We more often than not obey the law of least effort (Zipf, 1949), even if we know that making small, short-term sacrifices can lead to much greater overall benefits (Fredrickson et al., 2013) (Wood, 2010). This is a phenomenon that can be observed across history, right from the dawn of society to the present day. Aristotle called it the opposition between eudemonic and hedonic happiness (Aristotle, 1996). Psychologists might call it “time inconsistency bias” (Wong, 2008), the tendency to think fundamentally differently about present and future efforts and rewards. Or we might call it our inner fight between immediate and delayed gratification (Mischel et al., 1970). This phenomenon can be seen at play not just in our personal everyday decisions but also on a larger societal scale. As Hebrew University of Jerusalem professor Yuval Noah Harari puts it: we, as a society, have global issues, but we only have local answers (Harari, 2018). We have long-term problems, but we only have short-term solutions.

A possible way to solve this problem is to develop a value proposition framework designed especially for social ventures. It would have three components:

  1. Social dimension: the product or service has to be designed according to a social purpose. We might call this the “vision-level” dimension.
  2. Community dimension: the product or service has to fit into the environment of the smaller communities in which it is distributed. It also has to be scalable and easily adaptable to other communities. We might call this the “strategy-level” dimension.
  3. Individual dimension: the product or service has to be attractive enough to a large number of individuals who are willing to pay for it or at least make use of the solution proposed. We might call this the “product-level” dimension.

This concept has many points of similarity with the theory presented by Eric Ries as part of the “Lean Startup Methodology” (Ries, 2011), which in turn has its roots in the works of Steve Blank (Blank, 2012).

The idea also resonates with the concept of “Triple bottom line” (however, this concept mainly focuses on people).

I borrowed the following table from Ries’ book Lean Startup, with minor modifications.


Source of figure: (Ries, 2011)


Is social entrepreneurship fundamentally unsustainable?

In today’s world, currently experiencing a global pandemic and extreme uncertainty, governments and big businesses are doing everything they can to cut costs. Periods of economic downturn are particularly hard for social organisations that rely on donations as a primary source of income. Even during periods of economic boom, organisations focused on a social purpose are rarely seen as growth engines, and in the current climate many are struggling to survive. Why is this, and is there a viable solution that might make social enterprises more sustainable, or even recognised as strong contributors to economic growth?

I agoniseds over this question for years, until I came across an article that helped me to see the problem from an entirely new perspective.

In 2011, Michael E. Porter and Mark R. Kramer published an article in the Harvard Business Review titled “Creating Shared Value” (Porter, 2011). They offer the following definition: “The concept of shared value can be defined as policied and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.”
In other words, not just quarterly profit is the only measure of an organisation’s success. By addressing both economic and societal progress, we enable communities and individuals to create greater value that could have been unimaginable before. They compare the concept of creating shared value with other initiatives, such as fair trade. “Early studies of cocoa farmers in the Côte d’Ivoire, for instance, suggest that while fair trade can increase farmers’ incomes by 10% to 20%, shared value investments can raise their incomes by more than 300%.” For a family living below the poverty line, a 300% increase in profit can mean proper nutrition, access to education and healthcare services, and even the difference between life and death. Applying the concept of shared value on a large scale offers the potential to create an incredible amount of wealth and can be a catalyst for rapid economic growth. In my opinion, this could hold out the prospect to many millions of joining the ranks of the middle class, which in turn would further boost consumption, demand for products and services and economic growth. Applying the concept of creating shared value to social ventures could confer on these enterprises a real, long-term competitive advantage (Michelini, 2012), increasing at the same time both short-term profitability and long-term sustainability. While some experts have identified areas where the concept needs improvement (Crane, et al., 2014), I nevertheless see it as one of the most promising current ideas for driving change.

In summary, it is more effective to think about tackling the world’s big problems by breaking them down into smaller parts, while at the same time recognising that each part forms part of a larger system. Attacking these smaller problems one by one offers greater prospects that we will make a meaningful impact.

A social venture has to simultaneously satisfy the needs of the individual customer, the small community and society as a whole. One possible way to achieve this is to maintain a multi-level focus while designing products and services. In this way, we can bear in mind the requirement to make our product or service a good fit across the needs of the individual, the social environment of the community in which they live and the larger society of which they form part.

By applying the concept of creating shared value, we can simultaneously increase the short-term profitability and long-term sustainability of a business. Social ventures have the potential to become both catalysts of change and powerful engines of economic growth.




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